E-Residency and e-companies for digital nomads in Andorra

The Andorran government caught a lot of interest from digital nomads around Europe as they have been considering the implementation of an e-residency in Andorra to allow company set up without physical residency. The Minister of Interior and Justice, Mr. Josep Maria Rossell has committed to studying the viability of such a system following Estonia’s model of e-residencies. The small Baltic country has been very successful with its e-residency program geared to set up companies for e-commerce. Digital nomads that use the program do not need a physical residence in the country. Simple registration and a setup for a small fee make this option so popular. With e-commerce growing so rapidly, something like this will be a great support to companies who are trying to make a name for themselves. Just looking online at websites like Cell Phone Deal will show the statistics of e-commerce and mobile e-commerce growth and what they may mean for the future of these companies.

Now Andorra is certainly not the best example for a quick company setup. However, it has legit reasons all the same. Like every other country in the EU, GDPR compliance is mandatory in Andorra as well. Finding a GDPR consultant would help, considering what the consultancy company like Privacy Helper talks about it here. Besides GDPR, there is a lot of government red tape and restrictive compliance checks from the local banks. The process for a company set up in Andorra remains complex and time-consuming. This is owed to screening for potential money laundering risks and sufficient substance requirements in the country. It seems contradictory after all the efforts made encouraging companies with substance in the country to now switch over to a 100% form of offshore operation.

E-residencies certainly pick up on the trend of digital entrepreneurs and nomads moving around the world without permanent residency in any country. However it remains to be seen how this can be harmonized with local banking compliance and OCDE proper substance standards for a company’s registered address.

Andorra Solution believes that simplified processes for company setups and an e-company model would be beneficial for Andorra as a potential economic hub for digital companies from all over the world. However, anti-money laundering measures and monitoring tax liabilities for the beneficial owners of such companies are fundamental. Even for small businesses, the owners have to take responsibility for taxes. After all, even people with non-resident status have to pay income tax if they’re working in another country. If you want to see how it works, look up “non resident status canada” on the internet. Some people try to avoid this tax and face serious consequences.

Andorra wants to avoid negative press in this sense. Ensuring that beneficial owners of potential e-companies pay their taxes in their country of tax residency is not an easy task when it comes to people that move around all the time. The concept of digital nomads remains a complex issue as dividends distributed by an Andorran company ultimately are subject to taxation at the place of residency. Not having a tax residency and therefore not declaring any income tax may bring negative attention to Andorra that it wishes to avoid. Government and banks need to present clear rules of the game in order to avoid risks of making Andorra yet again a haven for tax evasion through a new loophole of e-residency.